Watch video: Is consolidation the best solution to your credit card debt problem?
credit card consolidation
7 Tips on credit card consolidation
- 1Lead a frugal lifestyle
- 2Make timely bill payments
- 3Select the best way to consolidate bills
- 4Track your payments
- 5Create an emergency fund
- 6Don’t incur new debts
- 7Follow a stringent budget
Credit card consolidation – How does it help you?
Credit card debt consolidation helps you pay your bills through affordable monthly payments. It leaves you with only a single financial obligation instead of multiple bills. The biggest benefit of credit card consolidation is the fact that it helps you lower your interest rates and monthly payments.
How does the credit card debt consolidation process work?
Credit card consolidation helps to restructure your repayment plan. This process helps to consolidate credit card debt into a single monthly payment plan. You have to make one monthly payment instead of handling several creditors. However, the payment amount basically depends upon your total outstanding balance, current interest rate, income, and the creditors.
You can typically consolidate credit card through 3 ways –
- Credit card consolidation program
- Do it yourself credit card consolidation
- Credit card consolidation loan
Find out how you can pay back your creditors through these 3 ways.
Is credit card consolidation the right option for you?
Check out the few factors which you must consider before opting for this credit card debt eliminate option.
- Regular income: Be it credit card debt management or consolidation or settlement, you can't fulfill your financial commitment without having a regular income. Keep it in mind that you won't be able to eliminate your credit card debt through consolidation. All you can do is pay back your creditors at a reduced rate. You have to pay off the debt and so a steady flow of income is extremely essential. If you can't make the monthly payments, then this debt relief option won't be able to help you out.
- Interest rates: As it has already been mentioned, the biggest benefit of consolidating credit card debt is the massive interest rate reduction. Lower interest rates allows you get back on the right financial path quickly. However, if the interest rate is not substantially reduced, then there is no point in paying the additional fees for consolidating credit card debts.
- Repayment term: Credit card consolidation allows you to lower your monthly payments. Sometimes, your monthly payment amount is significantly reduced in exchange of a longer repayment term. In such a situation, you may end up spending more than what you've actually calculated. Moreover, it'll take a longer period of time to get debt free.
Apart from the above mentioned factors, there are a few tips which you much follow in order to make credit card debt consolidation the right option for you. Here are a few tips on credit card consolidation which you must never miss out.
You can get financial freedom by consolidating your debts. However, you need to follow a strict financial regimen in order to repay your debts. The above mentioned tips will help you start a fresh financial life sooner.
Credit card consolidation vs settlement – What are the differences?
The basic difference between the credit card debt consolidation and credit card debt settlement is about the repayment strategy. In credit card debt consolidation or credit card debt management, you're basically able to reduce your interest rates and number of creditors. You're making only a single monthly payment. However, a credit card debt settlement program helps to reduce the principal amount.
In credit card debt settlement, you're able to solve your financial problems through a lump sum payment. On the other hand, credit card consolidation facilitates a single monthly repayment plan for you. It is not required to handle multiple unsecured debts any more.
Another difference is that in credit card management or consolidation, you attend a free counseling session wherein the counselor makes a detailed analysis of your income versus debt obligation. In settlement program, a trust account is created for you wherein you're required to save a certain amount every month.
|Credit card consolidation||Credit card settlement|
|Reduction in principal amount||No||Yes|
|Reduction in interest rate||Yes||No|
|Lump sum payment||No||Yes|
|Single monthly payment||Yes||No|
|Minimum debt amount||No limit||Yes|
|Effect on credit report||"Paid in Full"||"Paid as Agreed"|
Last updated on 2013-11-08
DebtCC Wiki: Find out how to manage credit card debt
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